ABSTRACT
The mainstream theoretical understanding of corporate governance relies on a neoclassical economic understanding of the firm in a world of atomistic, self-seeking, rational actors where the major problem to be addressed is a misalignment of Principal/Agent incentives. A simple way to think of a behavioural corporate governance framework is simple: just adds the quirky human being into it. This chapter explains solutions-oriented approach. The Global Financial Crisis when the field of behavioural economics had already infused much of the broad dialogue and drew new attention and energy. The UK and Irish Auditing Practices Board (APB) of the UK Financial Reporting Council also has issued a paper on professional scepticism as a useful stance to take in auditing activities since it makes individuals question their possibly biased priors. The conclusion is that there is a core set of findings from behavioural economics that has potential utility in correcting for some known malfunctions that are based in known limitations of human psychology.
